Why We Should Wage a War on Economic Immobility Instead of Inequality

January 20, 2014

With long-term unemployment historically high and still-pervasive economic insecurity in the wake of the Great Recession, it is understandable that many Americans have grown more concerned about the nation's levels of inequality, says Scott Winship, the Walter B. Wriston Fellow at the Manhattan Institute for Policy Research.

In long-run perspective, living standards have improved for the poor and middle class even as income inequality has grown. And contrary to claims that rising income inequality has hurt inequality of opportunity, the evidence of a link between the two is weak.

Income inequality within the bottom 80 percent of households has grown only modestly, primarily during the 1980s, and hardly at all since then.

Indeed, a wealth of research, including by the Congressional Budget Office, indicates that earnings and income inequality between the middle class and poor have not risen since the mid-to-late 1980s.

Not only has income inequality not grown as much as many suggest, but intergenerational mobility has probably not declined much -- if at all -- in the past three decades. To be clear, no research shows a sizable increase in mobility since the mid-20th century, but the most common finding is a change so modest as to be statistically indistinguishable from no change at all. In his own forthcoming research, Winship finds that today's 30 year olds have experienced no less mobility than did 30 year olds in the mid-1970s.

While upward mobility has not diminished over time, and while it has not been hurt by rising income inequality, it has nevertheless been stuck at unacceptably low levels for decades.

If past patterns hold, 70 percent of poor children today will fail to make it to the middle class as adults.

Four in 10 will be mired in poverty themselves in midlife.

The challenge, thus, is to identify real solutions to the problem of limited upward mobility.